"However, console-makers will need to sell games for $2 or else they will not be competitive with Apple.”

That's a joke right? The comparison between a $60 console/PC game and a $2 iOS game is... well, there is no way to compare them, they're not even the same target market or audience. That might be the dumbest statement anyone has ever made, even rivaling Pachter.

As for physical media they probably would not go entirely digital. They will probably do something like what Steam and Origin do; make physical CD keys redeemable on the service (though Origin seems to be better at that than Steam). I really do not think physical media will disappear entirely in the next generation, but it will eventually.

The market for $2 games on mobile platforms is already very wobbly. A few winners that make $$, but most dont sell much and quickly disappear off the radar. And spending $$ to market a 2$ game is a thorny problem with no answers.

In 2010-2011, I think many pubs and devs pinned their hopes on mobile gaming on phones, but it is not panning out.

The game industry is definitely struggling in the recession. Dedicated portable game consoles are floundering even in Japan. Home game consoles are turning into movie-streaming boxes.

PC games actually have a chance to regain some traction in all of this retail uneasiness.